TOKYO: Japan's Cabinet Office will issue forecasts this week showing Prime Minister Shinzo Abe's administration is falling behind its fiscal discipline targets, a document viewed by Reuters showed.
The forecasts could deal a blow to the credibility of Abe's fiscal policy and fuel lingering concerns that Japan is not using a recent increase in tax revenue to pare its debt burden, which is the largest among industrialised nations.
The Cabinet Office, which helps coordinate economic policy, expects a primary budget deficit of 6.5 trillion yen ($55.20 billion) in fiscal 2020, the document showed.
That is worse than the previous forecast of a 6.2 trillion yen deficit, which means the government is getting further from its goal of returning to a primary budget surplus in fiscal 2020.
The primary budget, which is an important measure of a country's fiscal health, excludes debt servicing costs and income from bond sales.
Abe's government also has a target of reducing the primary budget deficit to 1 percent of gross domestic product in fiscal 2018, which was intended to reassure investors that it will stick with fiscal discipline.
However, the Cabinet Office will say this week that the primary budget deficit will be 1.7 percent of GDP in fiscal 2018, unchanged from its previous forecast in July, the document also showed.
The Cabinet Office will submit its forecasts to the government's top advisory panel on Thursday.
Since Abe took office in late 2012 tax revenue has increased as economic growth improved. In fiscal 2016, which starts in April, the government expects tax revenue to rise to a 25-year high, which will allow the government to cut new borrowing to the lowest in eight years.
Still, some economists are worried because tax revenue gains depend partly on a jump in corporate profits due to a weak yen, which may not be sustainable.
The government also plans to increase cash handouts to pensioners and exempt food from further increases in the sales tax, which will reduce money flowing
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